💩Mini Budget = Major Fuck Up

This is The Hedge, the newsletter that brings you a weekly announcement that won't crash the national economy and force the central bank to step in.

• Prices accurate as of approximately Wednesday 7:19PM BST.

💷 That Went Well Didn't It

Well, that was a shitshow. Liz Truss released her mini budget on Friday and it's been an absolute clusterfuck ever since. I'm not going to bother giving a rundown of what was in it, because based on the reaction I'm pretty bloody sure the plan isn't going to be implemented as announced.

The pound is in freefall, confidence in the UK market has dropped and bond prices have collapsed. Just today the Bank of England has had to step in as a buyer of last resort for the long term bonds in order to stop pension funds collapsing like Northern Rock. It's a mess.

The way interest rates work is that longer dated bonds are impacted more by changes in interest rate. Here's a chart for the longest UK bond you can buy.

To save you pulling out the calculator, that's a drop of 84%. In a UK government bond. The part of your portfolio that is supposed to be "safe". Fuckin' bonkers.

🔵 Tory Headquarters Right Now

🚌 Pound Continues to Tank

Yeh it just keeps going. It crashed 5% in one day (that's a lot for a major currency) and then sank again the day after. GBP has come very close to parity with the USD, which may not seem like a big deal but mentally, it is.

If it breaks parity I believe we'll see it go a lot further. It's a mental barrier that will spook the markets even more than they are now. The Bank of England's measures have stabilised things for now, but I can't believe the government is going to be able to sit back and watch without at least making an attempt to calm the situation.

We'll see.

🌏 Snippets

• Banks and other lenders have frozen their mortgage books across the country amid the hectic shit going down in the long term debt markets.

• Someone blew up the Nord Stream gas pipeline. Well, blew a couple holes in it at least. EU blames Russia but they deny it. Obvs.

• British Defined Benefit pension schemes are dumping their long term gilts, effectively due to margin calls. With no buyers, this is why the BoE has had to step in. Serious shit.

• Morrisons profits down 50% as they get screwed by inflation. Awww, just like the rest of us.

See you next week 🚀

Jason